Strategics | High school » Indian Aviation Sector

INDIAN AVIATION SECTOR MARKET SIZE • Third largest domestic aviation industry in terms of passengers. Domestic air passenger traffic 100 mn in 2016( US - 719 mn and China - 436 mn) • Air cargo estimated to grow at 9% over the next few years • Fastest growing domestic travel market for 22nd month in a row, recording a 26.6% y-o-y growth as of Jan, 2017 International was a modest 77% • Domestic air traffic expected to grow at 25% and cross 130 mn in 2017-18 (CAPA) • CAPA estimates India’s airlines reported a combined profit of USD 122mn in FY 2016 • Huge tide of first time air passengers in the last two decades because of LCC • Multiplier effect on nation’s economy in terms of Investments, Tourism and Employment KEY DRIVERS • Low Cost Carriers • Modern Airports • Foreign Direct Investment in Domestic Airlines (USD 1.01 bn between April, 2000 and March, 2017) • Advanced Information Technology intervention • Growing emphasis on regional connectivity •

Civil Aviation Ministry has received an increased alloacation of 22% at USD 775.14 mn in Union Budget 2017-18 INDIA ADVANTAGE AIRPORT LANDSCAPE AND ACTIVITY MAJOR AIRLINES Airline Indigo Promoters/Owners A publicly listed company whose principal shareholder is InterGlobe Enterprises. Jet Airways A publicly listed company substantially owned by Naresh Goyal until Etihad Airways recently acquired a 24% ownership interest. Air India Owned by the GoI. SpiceJet Substantially owned by Ajay Singh. GoAir A wholly owned subsidiary of the Wadia Group, which has interests in textiles, real estate and other industries. Vistara A joint venture of the Tata Group (51%) and Singapore Airlines (49%). AirAsia India A joint venture of the Tata Group (41%) and AirAsia Berhad (49%). MARKET SHARE AVIATION TERMINOLOGIES • Passenger Load Factor (PLF) - Measures the capacity utilization of public transport services like airlines, passenger railways and intercity bus services. This

assesses how efficiently a transport provider fills seats and generates revenue • Aviation Turbine Fuel (ATF) - Aviation Fuel is a specialized type of petroleum based fuel used to power aircraft • Available Seat Kilometre (ASK) - The basic measure of capacity, one seat (empty or filled) flying one kilometre is as an ASK. It equals the number of seats multiplied by the number of kms flown • Revenue Passenger Kilometre (RPK) - Measure of sales volume of passenger traffic. RPK is measured when revenue passenger is carried one kilometre CAPACITY VS DEMAND IN THE DOMESTIC MARKET SYNOPSIS OF PASSENGER TRAFFIC PASSENGER LOAD FACTOR, 2016-17 MARKET SHARE OF INTERNATIONAL PASSENGERS CARRIED BY FOREIGN AND SCHEDULED INDIAN CARRIERS INBOUND VS. OUTBOUND INTERNATIONAL PASSENGER TRAFFIC, 2016-17 AVEREAGE SEAT CAPACITY Average Average Seat Capacity= Total ASK / Total Aircraft KM APPROXIMATE COST STRUCTURE IN INDIA (2015-16) OPERATING ECONOMICS • If PLF is

lower than BELF, airline runs a loss MONTH WISE MARKET SHARE KEY REFORMS • GoI has unveiled the Civil Aviation Policy; aims to move to a more liberal administrative and regulatory regime. • Fundamental objectives include affordability, connectivity and ease of doing business • Hopes to stimulate 300mn and 500mn air ticket sales per year by 2022 and 2027 respectively • 100% FDI Investment will allow access to new sources of capital which will boost both expansion and consolidation • Liberalized Open Skies (for all countries beyond 5000 kms radius from New Delhi) and Code Share Agreements. Initially Open Skies Arrangement was only with US • Keen to develop India as the MRO hub ( Maintenance, Repair and Overhaul) in Asia. MRO Business of Indian Carriers is valued at USD 1bn. 90% was outsourced initially • Foreign Aircraft bought to India can stay in India for a period of 6 months as long as they do not operate commercial flights in the period • Development and

modernization of Indian Airports and upgradation of quality of services • 5/20 rule abolished provided the airline deploys 20 flights or 20 pc of its capacity for domestic operations Focus Stocks INDIG0 – FACTS AND FIGURES • Started in 2006 – became largest plater in 2012 • Largest passenger Airline in India – Mkt share around 40% • Fleet of 136 aircrafts – only 18 owned by the company • Covers 46 destinations – 39 domestic and 9 international • 9 consecutive years of profitable operations • Operates more than 900 flights per day (Jet 650 and Spicejet 343) • Shifting from “Sale and Leaseback” model to “Outright Buy” • A contender for Air India STOCK PERFORMANCE PEER COMPARISON INDIGO VS JET SPICEJET – FACTS AND FIGURES • Commenced operations in 2005 • Third largest airline in India – Market share 14.2% • Owns a fleet of 45 aircrafts • Flies to 35 Indian and 6 International destinations • One of the remarkable

turn around stories • Ten times return on stock in 2.5 years • World’s best aviation stock this year – return 135% • Ajay Singh bought 58% of the company from Marans for Rupees 2 TAKING OFF SPICEJET VS JET SHAREHOLDING – KEYMAN “AJAY SINGH” THANK YOU